Recent Shifts in Capital Flow Patterns in Korea: An Investor Base Perspective

33 Pages Posted: 22 Jan 2020

See all articles by Niels-Jakob Hansen

Niels-Jakob Hansen

International Monetary Fund (IMF)

Signe Krogstrup

National Bank of Denmark - Economics Department; Danmarks Nationalbank (The Central Bank of Denmark); IMF

Date Written: November 2019

Abstract

Koreas cross border capital flows have tended to respond negatively in global risk-off episodes, resulting in volatility in the foreign exchange market and occasional policy responses in the form of foreign exchange interventions. We study the relationship between Korean capital flows and global volatility up to 2018. The response of capital flows during risk-off episodes have become more muted over time, and occasional safe-haven type flows into Korean bond markets have helped counterbalance the tendency for portfolio investors to leave. We describe these changing patterns and relate them to shifts in Korea's domestic investor base. We discuss whether they reflect a sustained shift in the sensitivity of Koreas capital flow pressures to global risk-off episodes, and implications for monetary and exchange rate policies.

Keywords: Foreign exchange market volatility, Financial crises, Risk management, International investment position, Financial intermediation, Korea, Capital flows, Exchange Rate, Flow of Funds., WP, foreign asset, capital flow, investor base, VIX, non-financial corporation

JEL Classification: F32, G11, G20, E01, F3, K2, F16, G12

Suggested Citation

Hansen, Niels-Jakob and Krogstrup, Signe, Recent Shifts in Capital Flow Patterns in Korea: An Investor Base Perspective (November 2019). IMF Working Paper No. 19/262. Available at SSRN: https://ssrn.com/abstract=3523137

Niels-Jakob Hansen (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Signe Krogstrup

National Bank of Denmark - Economics Department ( email )

1093 Copenhagen
Denmark

Danmarks Nationalbank (The Central Bank of Denmark) ( email )

Havnegade 5
Copenhagen, 1093
Denmark

IMF ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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